The shortage of hard drives crimped the company’s PC sales in the January quarter.

But the earnings report from Dell
DELL
also suggests that the hard disk-drive shortage that has hurt the computer market may not be as severe as many feared. One analyst said that bodes well for Hewlett-Packard Co.
HPQ, -0.33%
which is scheduled to post its own results after the closing bell Wednesday.

Dell shares were last trading down about 6.4% at $17.04. H-P shares were last down about 1.4% at $28.94.

Late Tuesday, Dell reported results for the quarter ended in January that slightly missed Wall Street’s estimates. The company also issued a revenue outlook that fell below expectations. Read full coverage on Dell's earnings.

Dell’s numbers pointed to problems that also affect H-P, including a struggling U.S. public-sector market and lackluster consumer demand. But the hard disk-drive shortage did not have as big an effect as many had speculated.

“Dell beat PC revenue expectations, meaning they were able to purchase all the hard disk drives they needed,” ISI Group analyst Brian Marshall wrote MarketWatch in an email. “I think H-P’s guidance assumed they wouldn’t be able to purchase all the drives they would need for the quarter. I think they were able to purchase them.”

However, Bernstein Research analyst Toni Sacconaghi said it was unclear “how much of its hard disk-drive issues were company-specific.”

He wrote in a note that PC makers Acer and Lenovo passed on higher disk-drive costs to customers, noting that both of those companies also gained share from “white box,” or unbranded, PCs.

”Our field checks suggest that H-P responded very differently than Dell to hard disk-drive supply issues by raising prices on transactional sales and discontinuing low-end products, which appears to have translated into notable share loss,” Sacconaghi added.

Dell did say that the company didn’t get enough supply of higher-end capacity drives, limiting its ability to make and sell higher-end PCs. That is a problem for a company that’s been trying to push deeper into higher-margin segments by de-emphasizing its lower-margin businesses.

Those efforts have paid off, as Dell’s improved profit margins have won praise on Wall Street, where the stock had jumped roughly 24% since the first of the year before Tuesday’s report.

Does Dell's results bode well for HP?

Dell’s report quickly sparked a debate on what it means for the Round Rock, Texas-based company’s push for greater profitability.

“That’s all folks,” Needham analyst Richard Kugele quipped in a note, as he downgraded the stock to hold from buy. “It’s been an impressive run year to date for Dell, rising over 24% and surpassing our $17 target as the fundamental improvements in its business mix were gradually recognized by investors.”

But Kugele said he sees the shares limited in the $16 to $20 range in the near term “as headwinds from the hard disk-drive shortage, lingering weakness in federal/state and local/U.S. consumer spending and continued pruning of the revenue mix combine to limit top-line growth and bottom-line leverage over the forecast period.”

Citigroup analyst Richard Gardner also cut his rating to neutral from buy, writing in a note: “In general, the easy margin expansion related to PC supply-chain re-engineering is behind the company, suggesting more volatility in operating margins and earnings going forward.”

Bernstein’s Sacconaghi also said that the company “provided a somewhat incomplete explanation for the shortfall on its earnings call, but we believe the majority was attributable to hard-disk drives and that Dell was caught off guard by its hard disk-drive mix in the quarter.”

But he also noted that the company’s “cash flow continues to be very strong, the stock’s valuation is compelling and the company continues to effect a positive mix shift in its business.”

“We believe that there is three to six months of revenue pruning before the stage is set for growth,” he wrote. “Plus, current demand challenges in the public sector are not helping. We recommend that long-term investors take advantage of any pullback in the stock.”

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